Jack Ma is at it again. Ma and his company, Alibaba Group Holding Ltd., think they can change brick-and-mortar retail shopping.
The company seeks to buy department store chain Intime Retail Group Co. for over $2 billion. This confused some observers. Intime’s revenues continue to decline. In addition, the company lacks a sprawling business too.
Jack Ma hopes to create a new model of online and offline retail. He hopes his company broadens its reach and acquire consumer data through the deal.
“No one has any solution or concrete answer, although everyone knows that this is the next page of the industry. Alibaba wants to be the one to develop the solution,” said Anson Chan, a Hong-Kong based Daiwa Capital Markets analyst.
Usually, internet and physical businesses do not work well in tandem. See retailers like Walmart as case studies. Online stores like Amazon have begun taking nascent steps into the arena.
Jack Ma, however, believes his company needs new sources of revenue as its e-commerce operations max out. Ma wants to cut out intermediaries in China’s retail industry. That is why he eyes Intime. It is also why it bought two other similar companies too.
Chinese retailers want unification. Malls in the country lack proper management. Inconsistency plaques outlets. Intime represents one of the few notable operators. The company controls nearly 30 department stores and 17 shopping malls across China. However, its operations center in eastern Zhejiang province.
One analyst described the retail landscape as such:
“Physical retail in China is backwards compared to elsewhere. It’s going to be a root-and-branch effort to get the offline side up to standard, and that’s probably why Alibaba felt the need to take it over totally.”
The analyst said modernization creeps along at a slow pace. Although the technology is in place, the people must use it. They do not.
Plus there is another problem according to Hong Kong-based analyst.
“There is still the missing piece of the people who actually sell the items. Intime is only in Zhejiang, so there won’t be a national reach. Maybe in the grand plan, Alibaba will buy other department stores, since sales of department stores have fallen through the floor.”
Jack Ma May Diversify Alibaba via Logistics Management
Alibaba, like competitor Amazon, operates many online assets and services. These include a cloud computing business and mobile search. Analyst believe Ma’s company may interweave these operations into physical retail. For example, Bloomberg offered the example of shopper searching for a dress on Youku Tudou. The user may run a search on the company’s photo-recognition tech and find similar clothing on the internet. Its logistics company can assist retail shops with identifying storage space for inventory.
“What Alibaba might want to do is to crunch its marketing, logistics, cloud computing and search and entertainment services all into a package for brands to create value, something they won’t be able to do themselves,” said Julia Pan, a Shanghai-based analyst at UOB Kay Hian.